Paddy Power's Betfair gamble is paying off

The betting giant won €1.79 billion from its customers last year...

Paddy Power's Betfair gamble is paying off

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Costs related to the merger of Paddy Power and Betfair may have left the new betting giant with a £5.7 million (€6.6m) loss last year but there are plenty of other signs that it will prove to be a very profitable move in the years ahead.

Newly-published figures show that underlying earnings before interest, tax, depreciation and amortisation (effectively operating profits) from the combined business was up 35% to £400m (€462m) in the year to December, living up to market expectations.

The group won £1.55 billion (€1.79bn) from its customers in 2016.

In fact, the performance would have been significantly better but for a December run of “customer friendly football results”  that could have cost the group up to £24m (€28m) in revenues.

Overall group revenues rose by 18% last year to top £1.5bn (€1.73bn), with double-digit growth recorded across all divisions including operations in the US and Australia.

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In its results statement, the group confirms that it achieved total cost-reduction benefits of £65m per annum arising from the merger and that the £66m cost of achieving those benefits was fully incurred last year.

Some of the sheer benefits of scale of the merger have been highlighted.

For instance, Paddy Power Betfair now has more than 1,000 in-house product development specialists on staff and plans to invest up to £300m every year on marketing alone.

Chief executive Breon Corcoran commented:

"2016 was a transformational year for Paddy Power Betfair with much of the integration of the businesses completed sooner and more efficiently than expected.

"The integration of our technology platforms is on track and customers are already seeing some benefits, including more markets and better odds.  

"In keeping with our dual brand strategy, we are serving different parts of the market with distinct value propositions. For instance, at Cheltenham next week Paddy Power has a generous money back offer for second place and Betfair will reward winners with a free bet offer and exceptional odds.

"We have created a business with considerable scale that is stronger and better able to compete than either of the individual legacy companies. The group is well positioned to deliver sustainable, profitable growth."